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Escrow Definition

When two parties begin a transaction that involves an asset, a third party holds the asset for the other two parties until the transaction is complete. Until the escrow agent receives specific directions, they hold on to the asset(s).

Escrow in Real Estate

Often in real estate, these accounts are used. This is to ensure the buyer has enough time to conduct their due diligence. Additionally, this allows the seller to gain assurance that the buyer is capable of closing on the transaction.

For example, when selling a house, one generally creates an escrow account. This ensures that if specific conditions exists, that they are met prior to the transfer. Once all terms are met, the sale is final and funds transferred from the account to the seller. Likewise, the buyer receives the title at this time.